How to Effectively Manage Project Risk

When most of us think of project management, we think of schedules, costs, margins, charters, scopes and deliverables. However, many of us seem to overlook one of the most important variables in project management: risk. There are two primary forms of risk; foreseeable such as delays in material arrival, whether conditions or other tangible risk that could have been predicted and mitigated or accounted for. However, there could also be unforeseeable risk factors that many managers do not account for in the scheduling or cost equations. An article posted in takes the reader through a “Five-Step Risk Management Process.” According to the articles, the first step in project risk management is risk identification. To most of us who have lead teams in projects, understand the importance of this step during the planning phase. However, the author of this article enforces the importance of assessing risk sporadically throughout the duration of the project using tools such as process flowcharts, analogous project comparisons, risk checklists, work breakdown structures, and brainstorming. The second step in risk management is to quantify the risk. It is vital to assess the probability that the risk will occur and subsequent consequences that are possible with regard to project schedule, cost, scope and quality.
Another step in risk management is to initiate a risk response plan. Also, identifying the risk as positive or negative will enhance the effectiveness of the risk response plan, allowing project managers to focus on avoiding or mitigating negative risk and exploiting positive risk to their advantage. The next step to risk management is continual monitoring and control of risks. Whether foreseeable or not, many times we get so focused on meeting deadlines and staying on budget that we forget to evaluate and control risk as it comes up. Monitoring and controlling risk should be a day to day operation for project managers, rather than a one time activity.
This article mentions that project managers are to predict foreseen and unforeseen risks. In most cases this is easier said than done. I was recently working on a project at work. We had outlined all the potential risks that could affect our schedule and bottom line. In addition this was a long term project that should have evolved into a full-time corporate initiative if successful. As the project continued, there were some unpredictable legal and regulatory changes that had come up in lieu of ObamaCare and other government initiatives. Although we knew these changes were coming, there was no way to predict when and how it will begin to affect Medicare Advantage plans. The timelines had been postponed numerous times so it was a difficult circumstance to predict. Nevertheless, there were no margins built into this project to accommodate the possibility of these new changes. Had the project management team assessed the circumstances and risk throughout the duration of the project, we could have accounted for these changes and avoided a major financial and schedule setback.
Have you ever experienced a risk that could have been mitigated if the five rules above were incorporated?

Taylor, Michael. “How to Effectively Manage Project Risks.” ITBusinessEdge, 2012, QuinStree, Inc.

9 thoughts on “How to Effectively Manage Project Risk

  1. I do see the value in using the above steps to mitigate risk in one of my job functions. When we sell a piece of equipment, there is a significant effort put forth by both my company and the customer (usually a hospital) to successfully integrate that item and learn how to use it. While we try to mitigate the foreseeable risks (including item not shipping; item arrives in non-working condition; customer does not return required information; etc.), we often find that the biggest risk is the customers themselves. They often don’t prep for installation, schedule time for training, or tell any of the necessary people that we will be on site. We consider this both a foreseeable and unforseeable risk, in that we can tell if a customer hasn’t filled our required information or returned completed checklists, but we don’t really know if they have prepped properly until we have already made the trip out to see them.

    I have found that some customers who treat these site visits as a project tend to needlessly complicate the process by involving too many people and subjecting us to every email and conference call they want to have; however, they also tend to be well-prepared for a smooth installation and training. And I have found that they too have done some sort of risk management that incorporate at least some of the 5 rules.

  2. Thanks for an interesting blog post! In my industry, there are a number of risks due to the fact that online advertising exposes images and content onto the Internet for the world to see. However, in my experience I’ve found that projects not central to my organization’s bottom line are most at risk when it comes to completion of the project. Resources are often hard to allocate when a project is viewed as something “extra” and there is often a lack of managerial support or attention. Because I’m in an Operational role, the lean structure of my department doesn’t allow for many free time “projects” which could help the company grow if allowed (in my opinion!). I believe there’s a fair amount of risk in also not allowing employees to be creative and add value when and where they see it is needed.

  3. Project risk management is perhaps one of the few topics not stressed as much as it should be. poor risk management can make a project fail. While the 5 steps works very well for predictable or foreseeable risks, it doesn’t help as much for unforeseeable risks. Risk due to act of God or situation not imaginable like the twin tower on 911, Boston marathon, etc often caught someone unprepared. This unforeseeable risk situations require a efferent type of response instead of the five step approach.

  4. Thanks for your article
    I think project risk managment one of the topics which is being some how ignored by the project team while its one of the most importnat task which should be monitered during the project age.
    Also risk managment might help in the “future” similar project, so project team can avoid similar risks and find solutions for it.

  5. Thank you for an interesting blog and topic. I would have to agree on the fact that the risk management is not being exposed and stressed upon fairly. I believe that because of the lack of proper rick management studies that in many cases had led to the doom of many projects. It’s true that sometimes the foreseen conditions like an act of god could lead a project to fail, but that doesn’t mean that projects are left hanging without considering the risk associated with them.
    Conducting a proper rick management could help a future project from facing the same problems if it was put to the test and faced similar issues..

  6. Thank you for this post. I totally agree with you on the fact that project risk management is a very important aspect in project management, if not the most important. I believe that the most important aspect of project risk management is that it accounts properly for project risks and uncertainties, it also give the management in the organisation he confidence to invest and take decisions and also i think it gives a very good objective assessment of the project. In my view, organisations and project management departments should focus more on the risk side as it will benefit them in the end.

  7. Thanks for the post and your thoughts on one of the most critical part of the project management process. Yes the project managers have always faced the problem of managing/mitigating the unforeseen risks, though its relatively easier to manage the risks which come up in the initial risk assesment of the project. To me the best solution can be made to the unexpected risks is to leave a margin for those both in terms of cost and duration, it won’t eliminate it completely but will definitly reduce it.
    In the end I would say that most of the project managers consider risk assesment as one text book exercise and do not concentrate much. They should make a full effort in identification and the mitigation of the risks.

  8. would like to thank you for the useful article, risk management is a very important task which need to be managed properly, in my opinion risk assessment and estimation need to be studied step ahead before project awarding, I mean to say during the sales stage, if project team worked side by side with sales team to identify risks and estimate it is cost the load will be reduced on the project manager.

  9. thank you for the article, managing risk as you go through the project is very important especially if you want to identify the unenforceable risks, because some times its the closer you get to that risk the better you can identify it. another thing is that you should know when is it the right time to switch to your contingency plan, that would be the hardest decisions to take.

    For example in our project that we worked in, we had to get a venue to set-up a stall in it and sell cupcakes, so we contacted a mall management and one of the board director of that mall, they both assured us that we will get the venue, we identified the risk of not getting it (although it was assured),and we had a contingency plan (alternative venue: university campus and deliveries), but the risk that we didn’t see is that the first venue approving manager was on sick leave and that they kept us waiting for an answer until the last minute without a any sort of approval or disapproval, so we had to take the decision that we are going with our contingency plan.

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